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Why Abbott's Falling Dividend Isn't a Concern

Abbott's dividend is falling, but it's offset by Abbvie's big payout.

With the impending spinoff of its branded-drug business, Abbott Labs(NYSE:ABT) is changing in a big way, and its dividends aren't immune. To help investors better understand the upcoming event, I've just released a brand new premium report outlining both Abbott Labs and its spinoff, AbbVie. Here's a short preview of what you can find in the full report.

What's happening to my dividends? The current plan, which hasn't been approved by the boards of the soon-to-be-separate companies, is for AbbVie to pay an annual dividend of $1.60 per share, starting with the quarterly dividend that will be paid in February. The old Abbott's dividend will shrink to $0.56 per share.

If the companies can adhere to that plan, the total dividend will be $2.16 for the two companies, a solid 5.9% increase over the current annual dividend of $2.04.

As the dividend has increased, it's become an increasingly larger portion of Abbott's free cash flow, but it's still using well under 50% of free cash flow to fund the dividend, which doesn't seem in danger of going anywhere. Free cash flow has decreased in part because of increased capital expenses, but the growth of those expenses is unlikely to exceed the growth of cash from operations for an extensive period of time. In other words, free cash flow should get back to growing again, which will support a larger dividend.

I hope you enjoyed this preview of our brand new report on Abbott and the future AbbVie. In the full version, I outline all of the must-know opportunities and risks facing both companies, so be sure to claim this 2-for-1 report by clicking here now.